Tesla Plans Over 10% Global Workforce Reduction Amidst Market Challenges

Tesla, the trailblazer in electric vehicles, is poised to trim over 10% of its expansive global workforce of 140,000 employees, marking a significant restructuring move in response to market dynamics.

This decision, outlined in an email reportedly sent by CEO Elon Musk over the weekend, underscores the company’s drive for “cost reductions and increasing productivity” amid intensified competition and subdued demand in the electric car sector, as detailed in a Reuters report. While the email did not directly address waning demand or Tesla’s sales performance, it emphasized the necessity of organizational streamlining.

In his communication to Tesla employees, Musk emphasized the imperative of reorganizing the company approximately every five years to position it for sustained growth. This comes alongside the departure of two high-ranking executives, Drew Baglino and Rohan Patel, prompting Musk to engage with concerns on the X platform.

Tesla’s recent sales figures reflect a year-over-year decline in the first quarter of this year, marking its first dip since the pandemic’s peak four years ago. Although briefly relinquishing its global EV sales crown to Chinese automaker BYD in the fourth quarter, Tesla reclaimed the title in the first quarter despite the sales downturn.

While the broader electric vehicle market continues to witness growth, Tesla’s adjustment in workforce reflects a broader trend, with major automakers like General Motors and Ford recalibrating EV production in response to softer-than-projected demand. Despite industrywide growth, US EV sales, while surpassing the 1 million mark for the first time last year, grew at a slower-than-anticipated rate of 40%.

Tesla’s strategic expansions, including new factories in Germany and Texas, and plans for a plant in Mexico, have been accompanied by a moderated pace of headcount growth. After consecutive years of substantial increases, Tesla experienced less than a 10% growth in employees in 2023, according to company filings, culminating in a workforce of 140,473 by the year’s end.

This move isn’t unprecedented for Tesla, which previously announced workforce reductions in 2019 and 2022. Despite lacking confirmation from Musk or Tesla regarding the latest round of cuts, the company’s shares saw a 3% decline in early trading Monday, reflecting investor sentiment amidst the restructuring reports. Tesla’s response to requests for comment on the matter remains unconfirmed.